FBI's 'We're From The Cable Company' Ruse Not Convincing To Magistrate Judge

from the we-can't-fix-the-problem-but-we-can-look-through-all-your-stuff dept

The FBI's decision to impersonate repair technicians in order to perform a warrantless search is backfiring. Last July, FBI agents investigating an illegal gambling operation worked with Caesars Palace Casino to cut the internet connection to three villas it believed were the operation's ad hoc headquarters. It then sent agents disguised as repairmen to "fix" the problem. Once inside, these agents took photos, recorded video and otherwise observed what they believed to be an illegal bookmaking operation.

Shortly after this warrantless search, the FBI decided it was time to get a search warrant. In its warrant request, it conveniently left out the part where it cut the DSL connection and sent in agents dressed as repairmen. Because of this "fatally flawed" application, a Nevada magistrate judge is recommending the federal district court toss the warrant and suppress the evidence. [Decision pdf link]

Magistrate Judge Peggy Leen ruled that the failure to mention that the original case was born from the "ruse" meant the judge who signed a search warrant this summer didn't have all of the facts. Nowhere in the search warrant request, however, did the authorities mention that they allegedly saw illegal wagering on computers after posing as technicians who in reality briefly disconnected the DSL.

"The investigators' suspicions that Phua was engaged in illegal sports betting at Caesars Palace may be borne out by the evidence recovered in the execution of the warrant," Magistrate Judge Peggy Leen ruled "However, a search warrant is never validated by what its execution recovers."
The material omission of the probable cause's origin (a warrantless search using agents posing as repairmen) should have been enough to get this warrant tossed. The FBI, of course, claimed it omitted this information because it was "law enforcement sensitive." One would think a magistrate judge should have access to sensitive material because it's part of the "law enforcement" field, but the FBI apparently felt otherwise.

Beyond that, there were several flaws in the application -- flaws Judge Leen says weren't intentional but "reckless." The FBI skewed the minimal amount of information it had collected from its illegal entry to make it seem as though it had actually acquired much more damning evidence.
The affidavit was written in a way to suggest investigators had much more information linking Phua to an illegal sports betting operation or wire room connected with the occupants of villa 8888. The affidavit’s repeated use of the phrase “Phua’s and his associates” or “Phua’s associates” or “at the behest of Phua or one of his associates” suggests that Phua was making requests and engaging in conduct which he was not.
And that's only one small part of the affidavit. According to Judge Leen, nearly everything the FBI stated in support of its warrant request completely misrepresented what was actually happening at the Caesar's Palace villas. (Keep the following in mind the next time you visit Las Vegas. In an FBI agent's vivid imagination, your normal, lawful gambling can easily acquire very sinister connotations.)
The application failed to disclose to the issuing magistrate judge that Wood and SA Lopez defied the butler’s instruction to remain in the butler’s pantry and entered the villa in violation of the Fourth Amendment. The application also falsely stated that Wood was fearful for his safety and was too afraid to accompany SA Lopez on a subsequent entry into villa 8882. A video of Wood’s interaction with the butler taken on July 4, 2014, and produced by the government in discovery reveals this claim is false.

[...]

The affidavit falsely stated that an unidentified “associates” of Paul Phua reserved all three villas and that the residents of the villas arrived close in time to each other. In fact, the principal resident of villa 8888, Hui Tang, made his own arrangements with Caesars and arrived several days later than the warrant application claims

[...]

The application is grossly misleading in claiming that eight separate internet lines were installed, and by omitting the fact that the only unusual amount of computer equipment was in villa 8888 and was installed at the request of that villa’s occupants. Caesars installed a single line in each of the six villas in the building, including three villas whose occupants were unrelated to this case.

[...]

The agents were working with Caesars’ DSL contractor, Wood TMS, and knew by July 4, 2014, that Caesars had decided to install DSL internet service in each villa as an alternative means of internet access because of pervasive problems with the internet service provided by Cox Communications. The installation of a single DSL line in 8882 did not signify any unusually large amount of internet traffic, and there was no evidence that the residents of 8882 made any unusual requests for equipment or technical support.

[...]

The affidavit described deposits to Caesars and transactions between Phua and his associates through Caesars which grossly distorted the nature of those transactions…[T]here is nothing suspicious about gamblers transferring money to their casino accounts. “Front money” deposits are common, and the casino frequently requires a deposit to extend credit. The application omitted references to these facts and attempted to characterize the deposits as suspicious.

[...]

The application represents that Phua transferred $3 million to Gyouye Huang. Huang was a guest in villa 8882. Caesars’ record actually indicates “signed marker MKR for $3Mil trans to 4266598 [Huang Caesars player number] Chen Husan per MG/Bing.” The search warrant application omitted reference to the fact that that it is common for gamblers to share credit lines and that specific individuals involved in this investigation had done so in prior years on prior gambling trips. Even assuming the agents were “confused,” confusion is not probable cause, and the credit line was not fairly characterized to the issuing magistrate judge.
And then there's the testimony of Special Agent Minh Pham, which contains an interesting statement caught by Marcy Wheeler of Emptywheel.
After Pham submitted and obtained the search warrant, he learned the affidavit contained errors. Specifically, it stated that Paul Phua wired $4 million into a Caesars account to secure a credit line. Pham later discovered it was actually Seng Chen “Richard” Yong that requested the wire to secure both their lines of credit. However, at the time Pham submitted the search warrant affidavit, he believed it was correct that Paul Phua had initiated this transfer.

The affidavit also stated Paul Phua had transferred approximately $900,000 from a casino in Fort Lauderdale, Florida, to the Caesars account. However, Pham later learned that Paul Phua had been only one of the individuals who signed the consent to have that money wire-transferred into Yong’s account. At the time Pham submitted the affidavit, he believed the statement was true based on documents from Caesars concerning monetary transfers that he had received. Pham referred to the spreadsheet contained in government’s Exhibit 2F as a document he relied upon to support his statement in the affidavit. The font size was very small and difficult to read.

He also discovered another error in the affidavit days later. There were transfers for $3 million between individuals in the villas. He looked at the spreadsheet, and it was off by one or two lines,” which caused him to associate the wrong name with the transfer.
As Wheeler notes, the FBI seems to have a malleable baseline when it comes to font sizes. What Caesars turned over voluntarily was "very small and difficult to read." But the agents used it without demanding something more legible. Compare that to the high-profile government takedown of encrypted email developer Ladar Levison.
You’ll recall that when the FBI went after Lavabit to get its crypto key, Lavar Levison tried to comply by providing a printout of the key. But the government complained it was illegible, and got Levison held in contempt.
So, Levison's 4-point printout of his encryption key was too small for the FBI, which complained to the court until it got its way. In this case, a "too small" printout was used without complaint, ultimately resulting in several flawed assertions being made in a warrant affidavit. "Too small" must be another part of the FBI's double standards -- one that makes concessions to third parties more amenable to the agency's aims.

A district court judge will make the final decision as to whether this warrant remains tossed. The saddest part about this is that the FBI gave itself an (illegal) head start and still managed to hand in a warrant request loaded with bad detective work and worse conjecture.

Filed Under: 4th amendment, cable company, cutting internet access, doj, fbi, hotel, paul phua, peggy leen, warrant
Companies: caesers


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  • identicon
    Anonymous Coward, 3 Feb 2015 @ 2:00pm

    One thing I never understood was that if these FBI disabled internet access, how were they able to determine bookmaking &tc were happening? Wouldn't those things be...online? Or were defendants wearing arm garters, smoking cigars and talking on big old telephones? Were street urchins running in and out with small bits of paper? Or were they sitting around in front of strangers (the 'cable guys') and talking about how much crime they were going to commit?

    reply to this | link to this | view in chronology ]

  • icon
    DannyB (profile), 3 Feb 2015 @ 2:17pm

    The FBI should have said . . .

    "We're from the cable company." and "This is a copyright issue. So we have unlimited powers, unconstrained by your puny constitution."

    reply to this | link to this | view in chronology ]

  • icon
    WDS (profile), 3 Feb 2015 @ 2:18pm

    ARS coverage

    If what I understood from the ARSTechnica coverage is right, the problem wasn't that they gained entry by lying, but the fact that they didn't say that they gained entry by lying on the warrant request.

    The judge basically said that getting in by pretending to be who you are not was okay, but not telling the judge while you were getting your warrant was a no-no.

    That troubles me in so many ways.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 4 Feb 2015 @ 7:42am

      Re: ARS coverage

      Exactly! So if they told the judge of their illegal activities - then it would have been ok? Incredible.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 4 Feb 2015 @ 8:46am

        Re: Re: ARS coverage

        Sadly, it is well settled case law that the government can lie to you whenever and however it suits them, but if you lie to them when they think it was material (and they can make that determination after the fact), that is highly illegal. They will often push the idea that you had an obligation to be truthful even when you didn't know you were lying to a government investigator. I don't know how often they get away with that.

        However, I think the point being made here is that, had the FBI told the judge they lied to gain entry, the judge could have made an informed decision of whether their immoral conduct rose to the level of unlawful search. As is, they wrote the warrant application in a way that implied they had gathered the evidence in a way that was already definitely lawful, so there was no need for the judge even to consider the question of lawful entry, only the question of whether the circumstances reported on the warrant application rose to the level of illegal conduct. (As Techdirt points out, there is also a serious question of whether the circumstances reported on the warrant have much basis in reality.)

        reply to this | link to this | view in chronology ]

  • icon
    afn29129 (profile), 3 Feb 2015 @ 2:54pm

    It's an idea....So many many ways..

    We're gonna slash the tires on your car so that our agent at repair shop can rummage thru your car's trunk while preforming the repairs.

    reply to this | link to this | view in chronology ]

  • icon
    Groaker (profile), 3 Feb 2015 @ 3:20pm

    Charges

    If citizens were to use the same excuses, actions and perjuries that the FBI used, the civilians would be laughed out of court into a jail cell. Law enforcement must be held to a higher standard -- not lesser, or in fact no standards for criminal behavior.

    reply to this | link to this | view in chronology ]

  • icon
    Padpaw (profile), 3 Feb 2015 @ 3:52pm

    someone should make a note of the judge's name, since he seems to be one of the few uncorrupted ones.

    reply to this | link to this | view in chronology ]

    • identicon
      David, 4 Feb 2015 @ 12:42am

      Re:

      Oh, you can be sure someone will make a note of the judge's name. The Department of "Justice" will make sure that rogue judges that put the law before law enforcement will be reined in and kept out of influential positions. Or convinced to start serving the greater good which pays better than just justice.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 3 Feb 2015 @ 4:53pm

    I'm trying to understand the whole point of this FBI operation. Caesar's Palace is a legal casino, in a state where gambling is legal, but a state located in a country where gambling is illegal on both the national leval as well as in many states. Apparently the 'illegal act' these guys were doing was taking bets over the telephone and then making them in person at the casino. Which is illegal under federal law, as the Interstate Wire Act prohibits even offering "information" to assist people in placing bets from another state (regardless of whether gambling is legal in that state or not)

    But the reality is that there are numerous websites that offer this same service online, apparently in direct violation of US federal law (Unless perhaps "wire communication" does not include internet?)

    http://www.onlinesportsbetting.net/usa/caesars-palace-las-vegas-sportsbook.html

    But this all comes down to one frequently asked question: Why does the US federal government spend so much money and resources enforcing antiquated laws and cracking down on activities that most people feel should be perfectly legal?

    reply to this | link to this | view in chronology ]

    • icon
      lucidrenegade (profile), 3 Feb 2015 @ 6:26pm

      Re:

      But this all comes down to one frequently asked question: Why does the US federal government spend so much money and resources enforcing antiquated laws and cracking down on activities that most people feel should be perfectly legal?

      A - The religious zealots who hold sway over conservative politicians don't like gambling.

      B - Casino owners don't want competition from online gambling sites, so they buy off politicians to pass laws making it illegal.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 4 Feb 2015 @ 8:05am

      Re:

      In Nevada any person involved with gaming must have a gaming license issued by Nevada. AFAIK the individuals in the villas did not. This would be an issue for Nevada authorities, not necessarily the FBI; thus the question of FBI involvement is still valid. Caesar's Palace could lose their gaming license if they allowed the activity to continue once they became aware of it, so they had an interest in stopping such activity.

      reply to this | link to this | view in chronology ]

    • icon
      PT (profile), 4 Feb 2015 @ 10:59am

      Re:

      That's a very good question. This affair is really the business of the State of Nevada, not the Federal Government. One supposes they were concerned about losing a nickel's tax. However, the FBI does seem to have a hard-on for Nevada. I recall that almost the first application of the Patriot Act was the FBI using it to investigate whether a local Las Vegas politician was receiving favors from a strip club.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 5 Feb 2015 @ 1:06am

        Re: Re:

        Well, Nevada has among the most completely corrupt politicians in the country. (Senator and Senate Majority Leader Harry Reid is from Nevada, by the way.)

        reply to this | link to this | view in chronology ]

      • identicon
        rocky63, 5 Feb 2015 @ 12:23pm

        FBI bogus warrant

        It may be the affair of Nevada as it was a state judge that issued the warrant in response to a lie-filled affidavit.

        But it was Federal agents who did the lying.

        reply to this | link to this | view in chronology ]

  • identicon
    AC, 3 Feb 2015 @ 5:54pm

    Next up, manufacturing the evidence

    ht tp://i.imgur.com/xbIPBuD.png

    Because doing it right is too hard.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 3 Feb 2015 @ 6:24pm

    home grown betting laws?

    I,m guessing the FBI is doubling down on "green housed" terrorist scams. They have been sooooo successful, you know.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 3 Feb 2015 @ 7:17pm

    "We're from the cable company" not a good introduction line

    Lately, among other things, DoJ has been whining about how everyone hates them, as evidenced by asking them to conform to their oaths while on the job. So, if you're tired of people hating you, obviously you want to impersonate the cable company, because everyone loves impersonators and everyone loves the cable company, so who could we love more than someone impersonating the cable company?

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 4 Feb 2015 @ 7:49am

      Re: Pros and cons of "We're from the cable company"

      Pros:
      - Cable companies have conditioned everyone to expect poor customer service and inadequate training, so the agents pretending to be cable technicians can pull off their cover with minimal training.
      - Likewise, cable companies have conditioned everyone to expect poor internal communications about technical problems, so faking a cable outage is a good cover. Even if the victim gets through to the real cable company and the cable company denies there is a problem in the area, it'll just be written off as the cable company not knowing their own network.
      - Everyone expects the technicians to be late, so agents have plenty of slack time to get their gear in order before walking in. On the other hand, this could work against them if they are too punctual.

      Cons:
      - As parent suggested
      - Real cable company technicians will be unhappy and/or be unjustly targeted. Just ask Doctors Without Borders how their vaccine efforts are going thanks to the CIA...

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 3 Feb 2015 @ 9:11pm

    I don't see what the problem is here. This is just your average, every-day spying on Americans on American soil and then using parallel construction in order to get around all those pesky legal restrictions so they can get the bad guy and be heroes!

    reply to this | link to this | view in chronology ]

  • identicon
    alan turing, 3 Feb 2015 @ 11:08pm

    There's got to be so much more to this story than this. Intriguing.

    reply to this | link to this | view in chronology ]

  • identicon
    pcdec, 3 Feb 2015 @ 11:26pm

    So not only did they waste a bunch of taxpayer money on violating people's rights with this (stupid to start with)investigation but now they're gonna waste a bunch more taxpayer money paying out a large settlement when the violated party sues. Awesome.

    reply to this | link to this | view in chronology ]

  • icon
    Harim G.A. (profile), 4 Feb 2015 @ 2:21am

    FBI mentality..

    FBI Agents see their "investigations" as a Return On Objective and not necessarily a Return On Investment.. They have blank checks and unlimited resources to perform their "duties" and are willing to spend a decade or more "gathering evidence".. When it all fails and they cannot find any real evidence they will either fabricate, entrap, or settle for the lesser charges they MIGHT actually have evidence of.. There is also a lot of leeway for their informants and agents to break laws themselves in order to "make an arrest", often times committing the very same crimes the accused are charged with.. Power corrupts absolutely.

    To the FBI, maintaining the *illusion* that they are catching bad guys is equally if not more important than ACTUALLY catching REAL bad guys.

    It's all a game of chess and if there are no moves on the board they resort to throwing the board away..

    Once the FBI is involved the only thing you can be certain of is that they will find something to pin on you - valid or not.. Additionally, all law enforcement has the misguided belief that "you can beat the charge but you can't beat the ride"

    Moral of the story? Take it to trial.. But there's nothing to be done about how you ended up there except riding it out. At least in a trial you have a small chance of exposing them for what they truly are..

    Organized crime funded with federal dollars.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 5 Feb 2015 @ 12:19pm

    'Ron Paul right, US deep into fascism'

    reply to this | link to this | view in chronology ]


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